China continues to play a long game in asserting its territorial claims and hegemonic ambitions in the South China Sea (SCS). After its confrontation with Vietnam over the Haiyang Shiyou 981 oil rig in May this year, Beijing has recently announced that it intends to build lighthouses on five islands in the SCS, two of which appear to be in waters also claimed by Vietnam. Indeed, China’s traditional position of ‘strategic ambiguity’ regarding its willingness to compromise on its territorial claims within what it calls the ‘nine-dash line’ looks increasingly obsolete.

Its assertiveness in the SCS needs to be seen as part of a new framework of Chinese foreign policy emerging under President Xi Xinping. China watchers point out that the new leadership appears to have conducted a reassessment of China’s security environment, its relative position and policy responses. Predecessor Hu Jintao’s description of the international environment as a ‘harmonious world’ has disappeared. So too has Deng Xiaoping’s guideline to ‘hide our capabilities and bide our time, be good at maintaining a low profile and never claim leadership.’ Instead, the security environment is assessed to be ‘under a new situation’ and according to Xi, China ‘needs to protect and make the best use of the strategic opportunity period to safeguard China’s national sovereignty, security and development interests.’

From a Chinese perspective, the ‘new situation’, characterised by the US strategic shift to Asia and growing tensions over maritime territorial disputes, requires ‘proactive assertiveness’ in the SCS. And the leadership is optimistic about winning a decade-long game for hegemony there. Bonnie Glaser and Deep Pal succinctly outline the thinking behind that approach:

Beijing’s proactive economic diplomacy [in Southeast Asia] is part of a larger strategy aimed at binding its neighbors in a web of incentives that increase their reliance on China and raise the cost to them of adopting a confrontational policy towards Beijing on territorial disputes. At the same time, China continues to engage in a steady progression of small steps, none of which by itself is a casus belli, to gradually change the status quo in its favor. In the near term, China’s leaders anticipate some resistance. Over time, however, they calculate that their growing leverage will be sufficient to persuade weaker and vulnerable neighbors to accede to Chinese territorial demands.

Can this strategy succeed? If regional and external players display a lack of political will and coordination to raise the costs for China, it well may. It’s difficult, for instance, to counter Beijing’s tactic of using swarms of fishing vessels backed by heavily-armed coast guard vessels to intimidate weaker neighbours.

But that outcome isn’t inevitable. So far, China hasn’t attempted to use military force to occupy disputed islands which would be a dramatic escalation. It’s reasonable to assume that Beijing is aware of the significant reputational damage it would incur through such a move. There’s also the risk of unwanted escalation. Contrary to conventional wisdom, states do go to war over territorial disputes which seems devoid of strategic value. The end of strategic ambiguity in the SCS provides China’s neighbours with a clear understanding about its intentions and the need to respond strategically. That response should include both investments in military capabilities (such as maritime domain awareness and asymmetric denial assets), as well as paramilitary, civilian and political tools to raise China’s reputational costs in the event of a major crisis.

It has also encouraged Southeast Asian countries to develop (or revitalise) stronger defence ties with external actors. More than ever, the region looks to the US for strategic support. Sensing the broader challenge to its leadership in the Asia-Pacific, the US has stepped up its rhetoric against China’s ‘nine dash line’ and has intensified its Southeast Asian defence engagement as part of its ‘rebalance’. China can’t exclude the possibility that attempts to settle the territorial disputes by military force could well draw in the US. Moreover, major external Asian powers such as Japan and South Korea now engage in regional defence capacity building, aware that what happens in the South China Sea will matter for maritime Northeast Asia.

Thus, China’s strategic success in the SCS is far from a done deal. Somewhat paradoxically, the end of China’s strategic ambiguity might increase regional stability by forcing all players to signal their intentions more clearly. Greater strategic competition isn’t necessarily a bad thing if it helps to define the parameters of mutual restraint in conflict situations.

What does that all mean for Australia? The Abbott government is on the same page as the US and Southeast Asian nations about the need to manage maritime disputes peacefully. Australia also has a major interest in strengthening Southeast Asia’s strategic resilience against coercion by outside powers. Whilst that doesn’t mean sending warships or fighter aircraft into the region, the ADF should, for instance, offer its expertise in maritime-domain awareness to countries such as the Philippines. Moreover, it should seek to utilise the US alliance more actively as a vehicle for multilateral regional defence engagement. Careful playing of the long game in Southeast Asia must become a priority for Australian strategic and defence policy.

Benjamin Schreer is a senior analyst at ASPI. Image courtesy of Flickr user US Navy.